Is It Time to Start Gold Prospecting?

Today what do you call a gold bug? Cautious, prudent, scared or a trend follower

The fact is that gold is on the move once again. As I am writing this post, gold is knocking on the door of $1020 again. Is it time to start gold prospecting? If you are a trend follower in the commodity markets, you would need to pay attention or already trade to gold. It is one of the strongest commodities in terms of relative strength and price action. On a Donchian trading approach, one would have been long gold since $968 on Sep 2. There is approximately $1638 in profit per contract. The point I am trying to make is there are gold bugs who suggest buying gold as the world is ending and there are commodity trading advisors that trade a system, who follow the rules and seem to be on the right side of trending markets.

One can absolutely go crazy following the news regarding any commodity or forex. As an example, there was a report in one of London’s newspapers Monday morning speaking about the rumor that Saudi Arabia, China and Brazil are trying to move away from the US dollar as a currency to buy and sell crude oil. One could easily eat up this news and go out and sell the hated US dollar that all seem to think will crash, buy some gold and maybe some crude oil with the extra change. However, this could be a fatal mistake. The key to long term success is simply follow the trend - it really is so simple. If crude is going to go up in price, a commodity trading advisor that adheres to trend following takes a bet; the same if the US dollar goes down…. Commodity trading advisors that are trend followers will sell the US dollar. No opinions, no thoughts, just a thought out trading plan.

You can be a gold bug or you can be a trend follower. You have to decide what you really want. You need to decide if you want to succeed over the long run. After all my years of investing, including real estate and hedge funds, there is nothing that can compare to trend following a large basket of commodities, forex, interest rates and stock indices. There is no other strategy that offers the liquidity and diversification of the potential for profit.

Comments

[sdavid0419:]

What would make someone like me think the dollar is going to go bust? By the way I DON'T think the dollar will ever go bust. I just think its going to have to lose a lot of its value. Lets start off with the premise that we are currently paying 56% of GNP to service existing debt and the presses at treasury are still printing money as fast as it can. Next lets consider the IOU's in the Social Security Trust Funds which are soon going to need to be replaced by more printed money as receipts can't possibly cover it. Add in not one but two wars that keep raising their cost in american lives as well as more printed dollars. Factor in an FDIC very much in the red and member banks can't contribute another dime. As the over 200 teetering banks crumble we no doubt will print more money to pay off the promised coverage of those insured accounts. Not to mention the pension guarantee fund the government managed to commit to taxpayers paying off a debt stockholders were liable for. Did I mention Congress generously paying unemployment benefits well beyond what the premiums were supposed to qualify for. In spite of all this my faith that we can overcome this is not shattered, however, the direction we are going definitely needs to be reversed sooner than later or else the dollar will go down.

Oct 06 08:36 AM

[roy piper:]

I consider gold the only real currency. I think the US will have bad inflation within a few years. But I don't like the gold bug moniker. Most of us do not think the world is coming to an end. But we do think that gold is going to do very well. Or, actually, the dollar is going to do very poorly.

We certainly are not trend chasers and we are snickering that some are just now thinking of getting on the bandwagon. But for us there is no bandwagon. We like gold because we have studied 3,000 years of history and we know what gold does when fiat currencies are expanded at the printing press and when most of a country's debt are held by foreign nations. We are just being fundamental investors.

Oct 06 12:04 PM

[anarchist:]

I will have to eat some crow here, I predicted that my Oct. 101 GLD call options would expire worthless (and of course they may yet expire worthless) so I rolled them to the Nov. 103s to keep them from being call away and made a slight profit. I still say $3000/oz is ridiculous but I will stay in while the part last.

Oct 06 12:47 PM

[Mad Hedge F...:]

cfy Of course you knew it was going to happen like this. After churning around just below the old high, and sucking in as many profit takers and short sellers as possible, gold blasted through to a new high for the year of $1,038. Never mind that the triggering event is complete balderdash, a story in Britain’s Independent newspaper asserting that the Middle East is holding secret global talks to price crude in the yellow metal or other currencies (click here for story at www.independent.co.uk/... ). It didn’t hurt that Australia cut its interest rates by 0.25%, the first G-20 country to do so. There probably isn’t enough gold in the world to finance more than a few weeks of global oil production. Total gold holdings would only fill two Olympic sized swimming pools. But never let the truth get in the way of a good trade. The confirming moves couldn’t be more ubiquitous, with the Canadian, New Zealand, and Australian dollars all up big, commodities strong, and silver also going ballistic. Regular readers will all recognize these as old friends of mine, core longs that I have been strongly recommending since the beginning of the year. I have been trying to get investors into gold since it was at $800. If you aren’t in gold by now, I can only tear my own clothes and flagellate myself for my abject failure to convince you of gold’s merits. US government debt is exploding, and with foreigners holding a large part of our paper, the only way to get out of this mess is to devalue the dollar. It’s like Obama invited China’s president Hu Jintao to dinner at an expensive Upper East Side restaurant, and was suddenly called away by a crisis, leaving him with a big fat bill. Next stop $1,200, then $1,500, then the old inflation adjusted high of $2,400. If you want me to help you get set up to trade futures in any of this stuff, please email me at madhedgefundtrader@yah... If you want to know where to buy physical gold and silver in size with the tightest spreads over spot, check with the experts at www.millenniummetals.net

Oct 06 01:59 PM

[5142152-337:]

The answer has been a resounding "YES" for about three years now. Anyone not jumping in up to their hips in PHYSICAL gold and silver is making a biggggg mistake. Do yourself a favor, do it!

Oct 06 03:59 PM

[robert99:]

Everyone's devaluing competitively. Gold and silver will probably continue to rise.

Oct 06 04:23 PM